Question 1

In the long run, prices in a monopolistically competitive industry will be ________ prices without trade.

Accepted Answer

A)  higher than 
B)  lower than 
C)  equal to 
D)  the same as 
A)  higher than 
B)  lower than 
C)  equal to 
D)  the same as

Question 2

In the long run, a monopolistically competitive firm that trades internationally will ____________than it would in autarky.

Accepted Answer

A)  produce more output 
B)  earn more monopoly profits 
C)  have higher average costs 
D)  produce more output and earn more monopoly profits 
A)  produce more output 
B)  earn more monopoly profits 
C)  have higher average costs 
D)  produce more output and earn more monopoly profits

Question 3

Can the index of intra-industry trade ever exceed 1.00?

Accepted Answer

No, the index of intra-industry trade ca

Question 4

The following table gives intra-industry trade in three industries. Which of the three industries has the greatest degree of intra-industry trade?

Accepted Answer

The answer of The following table gives intra-industry trade in...

Question 5

Explain why the gravity equation for U.S. and European trade may be higher than the gravity equation for U.S. and Canadian trade even though that the U.S. and Canada share a border.

Accepted Answer

The gravity equation for U.S. and Europe

Question 6

In what two ways does trade benefit consumers when firms are monopolistically competitive?

Accepted Answer

A)  better quality products, increased information 
B)  higher incomes, more dependable products 
C)  lots of bells and whistles, higher wages 
D)  lower prices, more variety 
A)  better quality products, increased information 
B)  higher incomes, more dependable products 
C)  lots of bells and whistles, higher wages 
D)  lower prices, more variety

Question 7

The higher the value for the index of intra-industry trade:

Accepted Answer

A)  the lower total trade is for other products. 
B)  the greater is the percentage of intra-industry trade in that good. 
C)  the more we should be concerned about job loss and outsourcing. 
D)  the higher the gains from trade. 
A)  the lower total trade is for other products. 
B)  the greater is the percentage of intra-industry trade in that good. 
C)  the more we should be concerned about job loss and outsourcing. 
D)  the higher the gains from trade.

Question 8

The gravity equation was tested and found to be very accurate in predicting:

Accepted Answer

A)  world trade in total. 
B)  trade between various provinces in Canada and American states. 
C)  trade between the United States and Japan. 
D)  trade between nations in the European Union. 
A)  world trade in total. 
B)  trade between various provinces in Canada and American states. 
C)  trade between the United States and Japan. 
D)  trade between nations in the European Union.

Question 9

Which of the following describes the long-run situation for a firm in a monopolistically competitive market?

Accepted Answer

A)  Competition drives out firms until there is only one left. 
B)  New firms enter the market because of monopoly profits, the firm's demand curve shifts to the left and becomes flatter, and monopoly profits disappear. 
C)  New firms enter the market and eventually there is only one kind of product, and each firm agrees to share the profits. 
D)  Consumers are left with no choices and no close substitutes, and firms make higher profits. 
A)  Competition drives out firms until there is only one left. 
B)  New firms enter the market because of monopoly profits, the firm's demand curve shifts to the left and becomes flatter, and monopoly profits disappear. 
C)  New firms enter the market and eventually there is only one kind of product, and each firm agrees to share the profits. 
D)  Consumers are left with no choices and no close substitutes, and firms make higher profits.

Question 10

How do consumers benefit from trade among monopolistically competitive firms?

Accepted Answer

A)  Prices are the same as in autarky, but the wider choice of goods increases consumer surplus. 
B)  Consumer surplus increases because prices are lower than in autarky, and there is a wider choice of goods. 
C)  Prices are higher than in autarky, but the wider choice of goods increases consumer surplus. 
D)  The government provides cash subsidies to consumers. 
A)  Prices are the same as in autarky, but the wider choice of goods increases consumer surplus. 
B)  Consumer surplus increases because prices are lower than in autarky, and there is a wider choice of goods. 
C)  Prices are higher than in autarky, but the wider choice of goods increases consumer surplus. 
D)  The government provides cash subsidies to consumers.

Question 11

NAFTA probably helped productivity in Mexico's maquiladora sector, but:

Accepted Answer

A)  the Mexican peso became undervalued, making it more difficult to export abroad. 
B)  increased competition from other countries may have limited its output growth. 
C)  both the Mexican and U.S. governments reversed some of the tariff reductions. 
D)  Mexico raised taxes on the maquiladoras, which caused tension with the United States. 
A)  the Mexican peso became undervalued, making it more difficult to export abroad. 
B)  increased competition from other countries may have limited its output growth. 
C)  both the Mexican and U.S. governments reversed some of the tariff reductions. 
D)  Mexico raised taxes on the maquiladoras, which caused tension with the United States.

Question 12

A monopolistically competitive firm faces demand given by this equation: P = 50 - Q. It has no fixed costs and its marginal cost is $20 per unit. What quantity will the firm produce when it is maximizing its profits?

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
A)  10 
B)  15 
C)  20 
D)  25

Question 13

Larger countries will trade more with one another; this is empirically supported by:

Accepted Answer

A)  intra-industry trade. 
B)  increasing returns to scale. 
C)  the gravity equation. 
D)  the theory of comparative advantage. 
A)  intra-industry trade. 
B)  increasing returns to scale. 
C)  the gravity equation. 
D)  the theory of comparative advantage.

Question 14

For a monopolistic competitor, marginal revenue at its short-run equilibrium price and quantity equals:

Accepted Answer

A)  price. 
B)  marginal cost. 
C)  average cost. 
D)  average revenue. 
A)  price. 
B)  marginal cost. 
C)  average cost. 
D)  average revenue.

Question 15

Studies of U.S.-Canadian free trade have concluded that the number of new jobs created in Canadian manufacturing was _________ the number of jobs lost elsewhere in Canadian manufacturing due to free trade.

Accepted Answer

A)  less than 
B)  equal to 
C)  greater than 
D)  substantially less than 
A)  less than 
B)  equal to 
C)  greater than 
D)  substantially less than

Question 16

Which of the following was NOT a reason for Canada to join NAFTA?

Accepted Answer

A)  Canadian firms could expand their markets by selling to the United States and Mexico. 
B)  Canadian firms could enjoy lower average costs by producing more. 
C)  Canada did not want U.S. products to dominate its domestic market. 
D)  Canada would experience an increase in income and employment by joining NAFTA. 
A)  Canadian firms could expand their markets by selling to the United States and Mexico. 
B)  Canadian firms could enjoy lower average costs by producing more. 
C)  Canada did not want U.S. products to dominate its domestic market. 
D)  Canada would experience an increase in income and employment by joining NAFTA.

Question 17

Which of the following features is characteristic of monopolistic competition?

Accepted Answer

A)  only one producer 
B)  homogeneous products 
C)  differentiated products 
D)  No individual producer has any influence on the market price. 
A)  only one producer 
B)  homogeneous products 
C)  differentiated products 
D)  No individual producer has any influence on the market price.

Question 18

In the long run, a monopolistically competitive firm will:

Accepted Answer

A)  earn normal monopoly profits. 
B)  earn excess monopoly profits. 
C)  earn no monopoly profits. 
D)  produce where marginal cost equals price. 
A)  earn normal monopoly profits. 
B)  earn excess monopoly profits. 
C)  earn no monopoly profits. 
D)  produce where marginal cost equals price.

Question 19

What term is used to describe situations in which countries specialize in and trade different varieties of the same type of product?

Accepted Answer

A)  comparative advantage 
B)  the Heckscher-Ohlin model 
C)  intra-industry trade 
D)  increasing returns to scale 
A)  comparative advantage 
B)  the Heckscher-Ohlin model 
C)  intra-industry trade 
D)  increasing returns to scale

Question 20

Which of the following is(are) factors affecting the constant (B) in gravity equation estimates?

Accepted Answer

A)  GDPs of the two countries or regions 
B)  tariffs and quotas of the two countries or regions 
C)  the distance between the two countries or regions 
D)  the share of trade in the GDPs of the two countries or regions 
A)  GDPs of the two countries or regions 
B)  tariffs and quotas of the two countries or regions 
C)  the distance between the two countries or regions 
D)  the share of trade in the GDPs of the two countries or regions

Exam 6: Increasing Returns to Scale and Monopolistic Competition

In the long run, prices in a monopolistically competitive industry will be ________ prices without trade.

In the long run, a monopolistically competitive firm that trades internationally will ____________than it would in autarky.

Can the index of intra-industry trade ever exceed 1.00?

The following table gives intra-industry trade in three industries. Which of the three industries has the greatest degree of intra-industry trade?

Explain why the gravity equation for U.S. and European trade may be higher than the gravity equation for U.S. and Canadian trade even though that the U.S. and Canada share a border.

In what two ways does trade benefit consumers when firms are monopolistically competitive?

The higher the value for the index of intra-industry trade:

The gravity equation was tested and found to be very accurate in predicting:

Which of the following describes the long-run situation for a firm in a monopolistically competitive market?

How do consumers benefit from trade among monopolistically competitive firms?

NAFTA probably helped productivity in Mexico's maquiladora sector, but:

A monopolistically competitive firm faces demand given by this equation: P = 50 - Q. It has no fixed costs and its marginal cost is $20 per unit. What quantity will the firm produce when it is maximizing its profits?

Larger countries will trade more with one another; this is empirically supported by:

For a monopolistic competitor, marginal revenue at its short-run equilibrium price and quantity equals:

Studies of U.S.-Canadian free trade have concluded that the number of new jobs created in Canadian manufacturing was _________ the number of jobs lost elsewhere in Canadian manufacturing due to free trade.

Which of the following was NOT a reason for Canada to join NAFTA?

Which of the following features is characteristic of monopolistic competition?

In the long run, a monopolistically competitive firm will:

What term is used to describe situations in which countries specialize in and trade different varieties of the same type of product?

Which of the following is(are) factors affecting the constant (B) in gravity equation estimates?

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

The Global Macroeconomy

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

Filters